A senior treasury analytics executive warns banks must rethink traditional deposit modeling as digital banking, rate sensitivity and AI-driven customer behaviors reshape liquidity risk and balance sheet management.
The assumptions underpinning bank
deposit stability are being fundamentally challenged by digital banking, rising
customer rate sensitivity and rapidly evolving financial behaviors, according
to the Head of Data Analytics at a regional U.S. bank.
Speaking ahead of CeFPro’s Trasury
& ALM USA conference in Charlotte next month,the executive warned that
traditional views around deposit “stickiness” are no longer reliable in an
environment where customers can instantly compare rates and move funds between
institutions in real time.
“What’s driving that shift is
definitely recent trends in technology and customer behavior,” he said.
“Digital banking removes the friction in movement of money. Customers can
instantly compare rates and move funds in real time.”
The comments reflect growing concern
across the banking sector that legacy deposit modeling frameworks may no longer
accurately capture liquidity risks during periods of market stress.
Since the pandemic, the combination
of rapid monetary tightening, mobile banking adoption and changing customer
expectations has significantly altered funding dynamics for financial
institutions.
The executive pointed to the
post-pandemic interest rate environment as a major turning point that increased
consumer awareness around deposit yields and intensified competition for
funding.
Customers are now increasingly
willing to shift balances in pursuit of higher returns, forcing banks to
rethink assumptions around deposit betas, runoff behavior and liquidity
management.
“Customers became quite aware of
significant yields that are out there,” he said. “The awareness around interest
rates creates a higher beta where customers are yield shopping and looking at
opportunities to enhance yield even on their deposit accounts.”
He argued that digital banking
adoption has had the most lasting impact on funding stability because it
permanently altered how customers interact with banks. While pandemic-era
stimulus temporarily boosted liquidity across the sector, he said the real structural
shift came from the widespread adoption of digital onboarding, real-time
payments and instant account access.
The risks associated with poorly
modeled deposits became especially apparent during the 2023 regional banking
crisis, when several institutions suffered severe deposit outflows and
liquidity pressures.
The executive said that failure to
properly understand deposit behavior can create significant financial,
operational and reputational consequences.
